The state would pay doctors and hospitals based on the quality rather than the quantity of care they provide under two bills introduced in the Texas Legislature Wednesday.

Lt. Gov. David Dewhurst and Sen. Jane Nelson, the bills' sponsors, said the legislation would overhaul the health care payment system, creating incentives that tie funding to patient outcomes. Currently, funding is tied to the number of procedures ordered.

"We shouldn't be rewarding the greater number of tests and treatments you get," Nelson, chair of the Senate Health and Human Services committee, said at a news conference. "We need to remember that those payments come from either the premiums that we pay as individuals or entitlement programs in our tax dollars. Those dollars should reward healthy outcomes."

Senate Bill 7 would focus on Medicaid and the Children's Health Insurance Program, authorizing reductions in payments if people were readmitted to the hospital or suffered complications considered preventable, for instance. Senate Bill 8 would deal with health plans covering state employees, teachers and others.

It's not clear if the legislation would reduce the Medicaid reimbursement cut that health care providers expect. Lawmakers are facing a shortfall of up to $27 billion for the coming two-year budget cycle, and Medicaid, which constitutes 25 percent of the state budget, is a prime target.

One proposal calls for a 10 percent rate cut, which hospitals and doctors say would be devastating.

2 associations back plan

Nelson, R-Flower Mound, and Dewhurst said they hadn't yet determined the savings the bills would generate.

But a Houston health care economist said it remains to be seen whether Texas can pull it off.

"Most health care economists favor this approach, but it seems very ambitious for one state acting alone to try to switch over to such a system in one legislative session," said Vivian Ho, a Rice University professor. "We just don't have the research yet to create formulas that prevent hospitals from gaming the system."

Ho said that properly compensating hospitals — so some don't dump the sickest patients or skimp on aspects of care not monitored - is a trial and error exercise that will take years to get right.

David Lopez, president of the Harris County Hospital District, said he favors the bills conceptually, but wants to see the details, such as the specific rules aimed at preventing patient dumping from affecting a safety-net hospital such as Ben Taub. Lopez said he also wants to know whether money saved under the program would decrease the proposed Medicaid cut.

Shaving would be shared

The bills would allow doctors and hospitals to work together to lower the costs of medical care and then share in the savings as an incentive, something they're currently forbidden to do under anti-kickback laws.

THA President Dan Stultz said at the news conference that San Antonio's Baptist Health System has been part of a successful Medicare pilot project following that model since 2009. The Baptist experiment has trimmed the cost of some orthopedic and heart procedures, and allowed the hospitals, surgeons and some 2,000 patients so far to share the savings, while the federal government monitors quality.

"As a result of this innovative approach, we have been able to lower the cost of care by millions of dollars since the program's inception," Michael Zucker, senior vice president of the Baptist system, wrote in an e-mail. "This has resulted in a win-win-win-win situation."

TMA vice chairman Dr. Tom Garcia said the physician organization is working with legislative leaders before formally endorsing the bills, mostly to ensure that doctors, not corporations, remain able to provide the care they believe is needed.

San Antonio Express-News reporter Don Finley contributed to this story.